G.R. No.

L-64159 September 10, 1985

CIRCE S. DURAN and ANTERO S. GASPAR, petitioners,

vs.
INTERMEDIATE APPELLATE COURT, ERLINDA B. MARCELO TIANGCO and RESTITUTO
TIANGCO, respondents.

RELOVA, J.:

The respondent then Court of Appeals rendered judgment, modifying the decision of the then Court
of First Instance of Rizal, which reads as follows:

(1) the complaint of the plaintiffs (herein petitioners) is hereby DISMISSED;

(2) the defendants-appellants spouses Erlinda B. Marcelo Tiangco and Restituto

Tiangco (herein private respondents) are hereby declared the lawful owners of the
two (2) parcels of land and all the improvements thereon including the 12-door
apartment thereon described in the complaint, in the counterclaim, in the cross-claim,
and in the Sheriff's Certificate of Sale;

(3) the plaintiffs-appellants and the defendant-appellee Fe S. Duran are hereby

ordered to deliver to (the Tiangcos) the two parcels of land and all the improvements
thereon including the 12-door apartment thereon, subject matter of the complaint,
counterclaim, and cross-claim, and in the Sheriff's Certificate of Sale;

(4) the plaintiffs-appellants and the defendant-appellee Fe S. Duran are hereby

ordered to pay solidarily to the Tiangcos the sum of Two Thousand Four Hundred
Pesos (P2,400) a month from May 16, 1972 until delivery of possession of the
properties in question to said Tiangco spouses, representing rentals collected by
plaintiffs-appellants and defendant- appellee Fe S. Duran;

(5) the plaintiffs-appellants and defendant-appellee Fe S. Duran are hereby ordered

to pay solidarily to the spouses Tiangco the sum of Twenty Thousand Pesos
(P20,000) as damages for attorney's fees, and the sum of Twenty-Five Thousand
Pesos (P25,000) for moral damages, and the costs. (pp. 149-150, Rollo)

The antecedent facts showed that petitioner Circe S. Duran owned two (2) parcels of land (Lots 5
and 6, Block A, Psd 32780) covered by Transfer Certificate of Title No. 1647 of the Register of
Deeds of Caloocan City which she had purchased from the Moja Estate. She left the Philippines in
June 1954 and returned in May 1966.

On May 13, 1963, a Deed of Sale of the two lots mentioned above was made in favor of Circe's
mother, Fe S. Duran who, on December 3, 1965, mortgaged the same property to private
respondent Erlinda B. Marcelo-Tiangco. When petitioner Circe S. Duran came to know about the
mortgage made by her mother, she wrote the Register of Deeds of Caloocan City informing the latter
that she had not given her mother any authority to sell or mortgage any of her properties in the
Philippines. Failing to get an answer from the registrar, she returned to the Philippines. Meanwhile,
when her mother, Fe S. Duran, failed to redeem the mortgage properties, foreclosure proceedings
were initiated by private respondent Erlinda B. Marcelo Tiangco and, ultimately, the sale by the
sheriff and the issuance of Certificate of Sale in favor of the latter.

Petitioner Circe S. Duran claims that the Deed of Sale in favor of her mother Fe S. Duran is a
forgery, saying that at the time of its execution in 1963 she was in the United States. On the other
hand, the adverse party alleges that the signatures of Circe S. Duran in the said Deed are genuine
and, consequently, the mortgage made by Fe S. Duran in favor of private respondent is valid.

With respect to the issue as to whether the signature of petitioner Circe S. Duran in the Deed of Sale
is a forgery or not, respondent appellate court held the same to be genuine because there is the
presumption of regularity in the case of a public document and "the fact that Circe has not been able
to satisfactorily prove that she was in the United States at the time the deed was executed in 1963.
Her return in 1966 does not prove she was not here also in 1963, and that she did not leave shortly
after 1963. She should have presented her old passport, not her new one. But even if the signatures
were a forgery, and the sale would be regarded as void, still it is Our opinion that the Deed of
Mortgage is VALID, with respect to the mortgagees, the defendants-appellants. While it is true that
under Art. 2085 of the Civil Code, it is essential that the mortgagor be the absolute owner of the
property mortgaged, and while as between the daughter and the mother, it was the daughter who
still owned the lots, STILL insofar as innocent third persons are concerned the owner was already
the mother (Fe S. Duran) inasmuch as she had already become the registered owner (Transfer
Certificates of Title Nos. 2418 and 2419). The mortgagee had the right to rely upon what appeared in
the certificate of title, and did not have to inquire further. If the rule were otherwise, the efficacy and
conclusiveness of Torrens Certificate of Titles would be futile and nugatory. Thus the rule is simple:
the fraudulent and forged document of sale may become the root of a valid title if the certificate has
already been transferred from the name of the true owner to the name indicated by the forger (See
De la Cruz v. Fable, 35 Phil. 144; Blondeau et al. v. Nano et al., 61 Phil. 625; Fule et al. v. Legare et
al., 7 SCRA 351; see also Sec. 55 of Act No. 496, the Land Registration Act). The fact that at the
time of the foreclosure sale proceedings (1970-72) the mortgagees may have already known of the
plaintiffs' claim is immaterial. What is important is that at the time the mortgage was executed, the
mortgagees in good faith actually believed Fe S. Duran to be the owner, as evidenced by the
registration of the property in the name of said Fe S. Duran (pp. 146-147, Rollo)."

In elevating the judgment of the respondent appellate court to Us for review, petitioners discussed
questions of law which, in effect and substance, raised only one issue and that is whether private
respondent Erlinda B. Marcelo-Tiangco was a buyer in good faith and for value.

Guided by previous decisions of this Court, good faith consists in the possessor's belief that the
person from whom he received the thing was the owner of the same and could convey his title
(Arriola vs. Gomez dela Serna, 14 Phil. 627). Good faith, while it is always to be presumed in the
absence of proof to the contrary, requires a well-founded belief that the person from whom title was
received was himself the owner of the land, with the right to convey it (Santiago vs. Cruz, 19 Phil.
148). There is good faith where there is an honest intention to abstain from taking any
unconscientious advantage from another (Fule vs. Legare, 7 SCRA 351). Otherwise stated, good
faith is the opposite of fraud and it refers to the state of mind which is manifested by the acts of the
individual concerned. In the case at bar, private respondents, in good faith relied on the certificate of
title in the name of Fe S. Duran and as aptly stated by respondent appellate court "[e]ven on the
supposition that the sale was void, the general rule that the direct result of a previous illegal contract
cannot be valid (on the theory that the spring cannot rise higher than its source) cannot apply
here for We are confronted with the functionings of the Torrens System of Registration. The doctrine
to follow is simple enough: a fraudulent or forged document of sale may become the ROOT of a
valid title if the certificate of title has already been transferred from the name of the true owner to the
name of the forger or the name indicated by the forger." (p. 147, Rollo)

Thus, where innocent third persons relying on the correctness of the certificate of title issued,
acquire rights over the property, the court cannot disregard such rights and order the total
cancellation of the certificate for that would impair public confidence in the certificate of title;
otherwise everyone dealing with property registered under the torrens system would have to inquire
in every instance as to whether the title had been regularly or irregularly issued by the court. Indeed,
this is contrary to the evident purpose of the law. Every person dealing with registered land may
safely rely on the correctness of the certificate of title issued therefor and the law will in no way
oblige him to go behind the certificate to determine the condition of the property. Stated differently,
an innocent purchaser for value relying on a torrens title issued is protected. A mortgagee has the
right to rely on what appears in the certificate of title and, in the absence of anything to excite
suspicion, he is under no obligation to look beyond the certificate and investigate the title of the
mortgagor appearing on the face of said certificate.

Likewise, We take note of the finding and observation of respondent appellate court in that
petitioners were guilty of estoppel by laches "in not bringing the case to court within a reasonable
period. Antero Gaspar, husband of Circe, was in the Philippines in 1964 to construct the apartment
on the disputed lots. This was testified to by Circe herself (tsn., p. 41, Nov. 27, 1973). In the process
of construction, specifically in the matter of obtaining a building permit, he could have discovered
that the deed of sale sought to be set aside had been executed on May 13, 1963 (the building permit
needed an application by the apparent owner of the land, namely, Circe's mother, Fe S. Duran). And
then again both plaintiffs could have intervened in the foreclosure suit but they did not. They kept
silent until almost the last moment when they finally decided, shortly before the sheriff's sale, to file a
third-party claim. Clearly, the plaintiffs can be faulted for their estoppel by laches." (p. 148, Rollo)

IN VIEW OF THE FOREGOING, We find the petition without merit and hereby AFFIRMED in toto the
decision of respondent appellate court promulgated on August 12, 1981.

SO ORDERED.